Non-Banking Financial Companies (NBFCs) have seen increased optimism in their stocks due to expectations of interest rate cuts and peaking government bond yields. NBFCs, which rely on bank borrowings and non-convertible debentures (NCDs), benefit from a changing rate environment, especially those with a higher share of floating rates. The recent decline in government bond yields indicates market expectations of a dovish stance by the RBI. Additionally, the competition in the wholesale borrowing market is expected to ease after the HDFC Bank and HDFC Ltd merger. However, factors such as credit growth and asset quality also need to be considered when evaluating the sector.